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Which Company Is the Largest?
Fudge Factor 3000 writes "Apple and Exxon are fighting it out to be the company with the largest market cap. Tuesday, Apple pulled ahead. It is hard to believe a tech company can beat out an oil giant, but is the market cap really the measure of the size/influence of a company? It is certainly the simplest metric to consider. Ars is running an excellent article on how to measure the size of a company. They discuss different metrics such as cash balance, revenue, number of employees, etc."
Does it really matter? Honestly, who gives a shit what company is the biggest?
I only care about the products/services they produce.
what is the future of a civilisation whose most capitalised stock is gadget manufacturer?
Of course it isn't. If it were, then the gyrations of the DJIA would mean that the total size of the representative corporations in the stock market have grown and shrunk across a 10% margin over the past couple of weeks. Those companies, and by extension the rest of publicly traded corps, and indeed business in general, have clearly not been growing and shrinking that much in any size except solely their market cap. The market cap is undeniably a contrived measure that is primarily an artifact of nothing but finance. Which in the past generation has become almost completely independent of underlying business, and even independent of any underlying reality except preferential treatment by the powerful.
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Market cap is a completely nonsensical way of saying "what's the largest company". Market cap is simply whatever irrational price the market has placed upon a company, and has zilch to do with its actual value as a cash generating engine.
For that, one has to look at book value or intrinsic value, as defined by Graham, Dodd, Buffett and others in the value investing fold. Book value (or carrying value) is simply assets minus liabilities minus intangibles (e.g. goodwill, the paid in capital during acquisition of other companies in excess of their book value). Intrinsic value, more or less, includes the net present value of discounted cash flows looking probably five or six quarters forward (any more than that is pure speculation as companies tend not to forecast out more than a year or two from the known inputs into their business).
A third way of looking at it is net working capital plus net operating cash flows... paring it down to inventories on the balance sheet side (working capital) and cash flows related directly to the sale of their goods/services, and not via financing activities, acquisition, etc. This is a really strong measure of how powerful a business is. By almost all of these measures, Apple is pretty strong, but their market capitalization seems to have them overvalued several times relative to what their future cash generating ability truly is.... which is why you won't see any offers for acquisition any time soon, not that Apple would entertain any of them anyway.
Although Apple is on top at the moment, they have a very volatile stock. This tend to discourage long-term investments generally accounts for less than 15% of a well balanced portfolio. Microsoft and also Exxon on the other hand have a stable stock price and they both tend to play it generally safe. It might not please stock holders who were looking to make money quickly but perhaps is how a company can achieve more maturity.
So yeah, they are big now but they might be tiny in a few months.
Views expressed do not necessarily reflect those of the author.
It's not the "making too much money" part that needs investigation, and really just correction. It's the "not paying taxes" part. Corporations, including rich tech corps, don't pay the costs the public pays for them to operate. In 2010, corporations paid only $176B in taxes; individuals paid over 100x that much. Corporations cost the public far more than 1% of our 2010 expenses. The $TRILLIONS spent by the public bailing them out of their failures, and of the failures of other corps they depend upon, is the bulk of our financial problems.
That they don't pay what they cost is the problem. That only about 50% of voters, the "liberals", even realize that's the problem is what keeps the problem getting worse. It's you Republicans who are to blame, which is why you're corporations' favorite suckers.
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Here is another way to think about it.
What if the company disappeared over night? How "important" are these companies?
If Apple disappeared, people wouldn't have their toys and music anymore and people who actually get work done with Apple products (like designers or movie editors) would have to migrate to other platforms like Linux or Windows.
If Exxon disappeared, the world would have a temporarily huge reduction in the available oil until competitors could pick up the slack which could take a long time in which case the whole world will fall apart (only slightly exaggerating).
So I say that Exxon is way more important than Apple.
By that metric, Microsoft, IBM, and Oracle are also way more important than Apple.
Cash flow isn't the same as profit. And it is somewhat tempered by the comparison that MS has twice the number of employees as Apple. Bear in mind Apple counts their employees slightly differently than MS. Apple has lots of part-time retail employees while MS has far fewer. Apple uses the equivalent employee hours where it counts 40 hours of a part timer as a full time employee. It is not completely 1:1 as full time employees normally receive benefits that part-time ones; however, this may be offset by other overhead in hiring and maintaining a part-time labor force.
Well, there's spam egg sausage and spam, that's not got much spam in it.
In 2010, corporations paid only $176B in taxes [fool.com]; individuals paid over 100x that much.
Individuals paid 17.6 trillion dollars in taxes? The link said it was $1.8 trillion, which would make 10x, not 100x.
No, corporations are privileged groups that own assets themselves. And spend on benefits for privileged people, like their executives, that are consumed without taxation. Groups that add many additional expenses to the public, like policing, investigations, courts, wars, trade diplomacy and bailouts. They are taxed at under 1% the total rate that humans are taxed in this country, but consume much more than half the expensive operations.
Money they don't pay in taxes they spend in foreign economies more than they spend here, and on Americans who are much less productive (bankers, lawyers, consultants, media spinners) than people to whom they must pay for their core operations.
The current corporate profits are higher than ever before in American history. Corporations are spending on neither current nor future employees (as we've seen for going on 3-5 years now). They aren't even investing in other corporate equity. With the exception of pure financial speculation, which keeps crashing the stock market and destroying real assets with every cycle. And the new exception of unlimited, secret and anonymous bribes, er, donations to politicians and their henchmen, er, henchcorps.
Somehow when getting government benefits corporations are people, but when facing liabilities like convictions and taxes corporations are not people. That is an obvious scam, that has brought this country just past the brink of catastrophe several times in just the past decade.
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make install -not war